When Is The Right Time To Exit?

Hey, capitalist piggies. Today we are leaking a call from the 1% with Leslie, a member who was really debating this question of when to sell, when to exit from her company and move on to the next opportunity. This is such a common and important question us entrepreneurs face. We just had to share it this week. If you don't know. The 1% is our mentoring group where we help members build businesses and invest the profits. This is ideal for people who are starting their journey and need help with their vision, people who are on a path to a 1% net worth. And it's ideal for people who are already very successful and looking to build passive income by going through our investment trainings. When you're ready to join us and you'd like to get on the next 1%, call like this, head on over to capitalism.com1 and we'll see you on the very next one. Ryan and Justyce coached Leslie with some very helpful and clarifying advice here in the group. So let's dive in.

Good morning, Leslie. How are you? Good morning.

Hey, guys.

Congratulations on your big progress these last few months.

No kidding.

Thank you. Thank you. All right, this is my issue. When is the right time to exit?

So, okay, so I have. I. My business will be sold. There's no doubt about it, because it's either I sell it or it dies. So those are my two choices. So it will be sold, and I've been thinking about selling it for years, actually. Let's. Let's go back maybe five years. And I have discussions with Quiet Light from time to time. I get it evaluated, and I'm just like, back at that place again of, is it the right time to sell and should I be selling it? So I will do 2.5 million this year, and my sales are like 20% or even more than 2019, which is cool. And my net is looking actually, truthfully better than it's ever, ever looked good. And I just keep going back, like, is it the right time? And I journaled about it a lot today, a lot this morning. So I'm really trying to, like, go deep and, like, why I should sell and these are the reasons and why I shouldn't sell, or these are the reasons and what is the biggest fear around selling? So what I realized this morning is that not okay. I have to sell. And I. And I'll tell you why. I. I want to be doing other things, and I'm already doing other things. So I've written a book. I'm already consulting. This is, like, my future and my Path, like my path is to inspire, to help, to give, to help other women entrepreneurs be successful. This is what I want to do with the rest of my life. I'm 64, so it's not like I'm your guys ages and I have like another whatever 20 or 30 or whatever years. Like even though I feel like I'm your guys ages and I feel great, the truth is I'm not. And so I have to keep asking myself if, if not now, then when.

Can we, can we jump in?

Okay.

All right. So. So, Leslie, what is the dream scenario after your exit?

Can I talk about my fear when I realize what it is?

First, I want you to tell me what your vision, your, your positive scenario is after you. Okay.

The positive scenario is there is enough money to have cash flow so that I don't regret giving up this amazing cash flow which I have right now.

Hold on. There was. That was such a convoluted thought.

Okay, okay, here's what I heard.

No, no, I'm going to repeat back what you just said. What you just said was my dream scenario is that I can sell my business and have enough passive income to replace the income that I just gave up by selling. It was totally fear based. It was totally like. So that means you're afraid the business is going to go away, so you're going to sell the business so that you can invest it in things that give you the income that replace the business that you just sold. Do you see how that's a crazy. Not a. It's just, it's just you're. That's, that's just fear at war with itself. You're afraid to keep it, you're afraid to sell it. So if you sell it, you put it into the stock market and the stock market goes down 50. You feel like an idiot.

Yeah.

Because you're making the whole decision out of, out of concern for money. You're whole. You're not. You're completely at war in both scenarios. Am I projecting or am I close?

Yeah, I would say you're pretty close.

Okay.

Yeah.

So why do you want, you want to sell the business to satisfy that fear. But that means the fear is still there because the stock market go down, real estate could go down, crypto could go down.

Yeah, that's the place. I want to sell the business so I have time to do other things.

Okay, that's better.

Okay, I, I am doing two things at the same time. I'm doing my business and I'm doing this other business. But I know that, that's not sustainable. I, I'm a big believer in focus and I feel like I need to do one or the other. And I feel like if I keep both of them, which I could, then the other won't ever really grow to how I want.

That's, that's logical. Now, do you have a vision if you, if you were told you had to keep the company for five years?

Yeah.

Do you have a vision for what that business will become?

I, I know it will grow in revenue. There's that vision. I know what could happen. Business.

Sorry, but the business itself, a vision five years from now, do you have one?

I don't see myself in it in five.

But the business itself.

Do you have someone else taking it over?

Yes. No.

No.

The business is a living, breathing thing outside of you. Does it know what it wants to be when it grows up?

Does it know what it wants to be when it grows up? I don't know if I can answer that.

That is your assignment then.

Okay.

Because here's the thing, Leslie, you are. There are more ways than one. Crack this nut. So if you're, if you've got a two and a half million dollar top line and your bottom line is 400,000 or 5. 500,000 to make the numbers easy.

Yeah.

Your bottom line is 500,000, you're going to sell that. That's less than a million dollar ebitda, which means you're probably going to get a three to four times profit, maybe five. Like if you have a home run win, you sell that at a five times EBITDA and you take home two to two and a half million dollars, you pay $500,000 to $1 million in taxes. So you're left with about 1.5, maybe 1.8. If you invest that really well and get 15%.

Your take home money is now less than what it was when you held the business.

Yeah.

So another thing that you could consider since you're already growing 20% year over year at a higher profitability than you have, if you were to sell it and invest the money, another option is for you to take $91,000 and go hire an incredible operation manager who is in charge of building the vision that you cast. And you say, now I'm going to be visionary, who's going to create a bunch of connections with women and inspire them and write books. It's going to open up all kinds of opportunities for me to hand off to Sally, who is now operations manager and better than you and came from a company that was bigger than yours and is building the vision that you cast. And it's the same thing as having an exit. Now, I'm not telling you to exit or not, but I'll tell you that if you just did that, you'll exit for more money than if you're just selling the assets of the thing that you're the solopreneur for. You actually don't have a very sellable business right now because it has no vision and no operations.

It has operations.

No, I had walk away and the business is growing in spite of you being away.

Sorry, what was that?

You have operations to the point where you could walk away and the business still grows.

I could. I would say I'm about five to ten hours a week in.

Okay, well then you're not as it will still directions as you claim to be. It's just the mental burden of trying to grow two things.

Yeah.

So I'm going through all this because I want you to see you've got options. You could take 90 grand and hire a wicked operations person who is in charge. You call that person a brand manager, even a COO or CEO to go execute on the vision of your business. But you've got to cast that vision first. Either way, you need to do that exercise.

For the buyer who's going to buy you. Or you might say, I actually don't even want to be a part of this vision. And now I need to sell it to somebody who really will build what is required for this business to become. This is why the first thing we make all of our incubator students do, experienced or not, is cast that vision. Because all of the decisions that are made from that place help build the foundation for an eight figure exit. You feel me?

Yeah. Okay. Thank you.

Really quick, Leslie, obviously, you know I'm a massive fan of yours. One of the things, you know the word like fear, you know it's false evidence appearing real. And so one of the things that I would be asking myself in this time as you journal, is how do I know that that's true, Especially about things in the future just to journal. How do I know that to be true? So the thing that I'm seeing that I think Ryan's hitting on too, is that you've given yourself two options. Build this women empowering movement. And the only way to get there is if I sell my business.

Right.

Right.

And I want to free you from that. Even if that is the truth, I want you to create more options for yourself. Because right now you're thinking Cash flow, which is. Which is good, and it's important. And because you're stuck in cash flow, you can't make a decision. And so if we. If we remove that and say, what other options are there that would keep cash flow where it needs to be, that doesn't put pressure on X or Y. And how can I make both of these two things an actual reality? How do I grow my cash flow from this while working less and building a female empowering movement in business? Yeah, how do you know what I mean? So you can do some really powerful things and also in two years, sell it for way more and not even feel like you have to. I think you have so many options of, like, how do I make this sellable? Well, what did. What operations would I need to have in place for someone to look at my company and go, this thing. I want to buy it. Okay, what would that require? Like, even. That might take a year. That's vision for a year while you're building this other thing and you're going to, oh, I'm making this an extremely sexy business for someone to want to buy. So now we're getting these things in place. Well, I can't do that on my own. Let me find an operations person that has experience here on getting. Do you see where my mind's going? It's like, oh, there's freedom, freedom, freedom, freedom, freedom. Options, options.

It's not either or. It's plus. It's inclusive. It's bigger than that. But it does mean a complete mindset shift for me of going into the, you know, the owner's role, you know, the owner's model, and believing that there even is a person out there like that who can do what you're saying for 90,000 a year, which at the moment, I don't believe there is, but I have to believe there is.

Well, let me shift something really quick. This comes back to identity for you, Leslie, what you're trying to create for other people.

I'd be really surprised someone doesn't want to work for that kind of a person. I think this is more personal identity than it is about, like, does that person exist? I think. And where Ryan started was casting that vision and seeing yourself as someone that builds things that people would be excited to join and bring their skill set to. Because a lot of operations, people are hungry for someone that has a real vision, and they will sacrifice a lot to do that. They will sacrifice a ton of. To be a part of that. Where you're thinking, would they want to make this Kind of money. Like, I don't know if they could, like, blah, blah, blah, blah, blah. No, no. Vision. Vision. Vision. Vision. I know a lot of people that took huge pay cuts to be a part of grand visions and amazing leaders because they're hungry to build something.

Okay, guys, that's you. Yeah.

Tell us your. Tell us your assignment. Tell us you're going to. How you're going to follow up so you don't have to eat a chicken.

Okay.

I'm going to write. I'm going to brainstorm on paper about the vision for my company and what the company will look like in five years from now. And I'm going to open my mind, even if it's just on paper, as to what a person can. A person I can attract into my world that can handle operations and grow the business so I could be even less involved.

And then you're going to post that in the 1%.

Then I'm going to post that in. In the 1%. And Ryan, can I just ask you to repeat those numbers that you said earlier? Like you were going 2.5 million, and then you have a net of 4 or 500.

Yeah, sure, sure. So if you don't do your assignment, you'll be eating one live chicken on the next one top call. Those are the numbers you wanted, right? The number of live chickens.

If you are taking home 500,000 a year, you'll sell this. A good valuation on a company that is only doing 500,000 in EBITDA is $2 million. So let's say you sell for 2 million bucks. 2 million bucks.

Is you're going to pay 24% capital gains. So a quarter of that goes to Joe Biden. That's $1.5 million that you take home. And of course, you've got local taxes, state taxes, all that stuff, expenses, transfers, broker commissions, all of that. Let's still say it's $1.5 million. Okay, I see $1.5 million invested.

Really?

Well, let's say you just did great. You did great. And you get 15% per year. 15% per year. And, and you're. You're wanting cash flow, so you're going to live off this money. If we were talking about compounding, you know, 1.5 million compounded means, you know, you'd have hundreds of millions of dollars by the time you die. But if we're living off cash flow, 15% of that is $225,000. 220. You've now just halved your income. You halved your income and you don't have a business. Yeah, it's a cool story that you can inspire women with about how you sold your business. And you've got, you know, you're now a multimillionaire on paper, but I think it's way cooler that you inspire women to say you had a two and a half million dollar business, you had an offer to sell and so you decided to take it to a $7.5 million business.

And if you're taking home 15 as your passive income, which is again, really good, you're still getting less of a return than you're getting in your business because it's growing 20 year over year. So the nut the numbers on paper suggest Leslie should keep her business. But I also understand, because I've been there, why you might decide to still sell when you're in that position. But first we have to unravel those that mental banter going on in your brain.

Yeah.

Okay, Cool. Good to see you, Leslie. Thanks for hanging out with us.

Thank you, both of you. Thank you so much.

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